Buying or selling?

Potential home buyers and sellers in Vancouver and Toronto might want to hear what Royal Bank of Canada has to say.

For the record, RBC senior economist Robert Hogue isn't giving advice to wannabe home owners. But his latest outlook for the Vancouver and Toronto housing markets may be well worth the read.

First, Vancouver, where resales fell in March to their lowest level in more than three decades while prices continued to decline.

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“Very weak market conditions got even weaker in Vancouver, where policy measures introduced by all levels of government in the past couple of years continue to keep buyers disinterested – or discouraged,” Mr. Hogue said in his report.

And here's a key bit: "If the reason why Vancouver buyers are staying on the sidelines is that they’re waiting for more significant price breaks, that could well be what’s coming. We expect property values to remain under intense downward pressure in the near term."

In Toronto, the latest report from the local real-estate board showed sales were flat in March compared to a year earlier, and benchmark prices rose 2.6 per cent.

Notable was that new listings declined by about 5 per cent as potential sellers held back, and this "lack of buying options" may have played a role in the March softness.

“This possible explanation finds some support in the fact that the benchmark price rose at a faster pace in March (2.6 per cent year over year) than February (2.3 per cent) – suggesting that buyers had to bid more aggressively in the face of limited supply,” Mr. Hogue said.

“We expect more sellers to come out of the woodwork over the next few months as a (slightly) stronger negotiating position boosts their confidence,” he added.

"Given generally balanced demand-supply conditions, price increases are poised to stay in the low single-digits in the near term in the Toronto area."

Markets at a glance

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Ticker

Housing starts rise

Housing starts across Canada perked up last month after a bitter February, rising to an annual pace of 192,500 in March from 166,000 a month earlier, Canada Mortgage and Housing Corp. said today. Separately, the value of building permits fell 5.7 per cent in February from January, largely because of condos, Statistics Canada said. For residential real estate alone, permits fell 8.5 per cent to their lowest since April, 2017. CIBC World Markets senior economist Andrew Grantham said of the CMHC report: “While housing activity will remain a drag on GDP growth this year, with the six-month trend in starts still signaling a slowing, today’s data suggest that February’s pace was likely depressed by even colder than normal temperatures in some parts of the country.”

Aramco demand high

Demand for Saudi Aramco’s first international bond, seen as a gauge of potential interest in its eventual initial public offering, is higher than US$30-billion, Saudi Energy Minister Khalid al-Falih said today. Reuters reports.

What to watch for this week

You'll have to make sure to pause and catch your breath once or twice as these busy few days play out.

“The window for finding an agreement before April 12 is pretty much closed, which means that an extension is the most likely outcome,” Mr. Hewson said.

The ECB, in turn, is expected to make no change to monetary policy amid a deteriorating economic outlook.

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"But President [Mario] Draghi will have no choice but to give a downbeat assessment of the economic outlook, which will probably set the stage for lower macroeconomic projections in June," Gabriella Dickens and Melanie Debono of Capital Economics said in a lookahead to the decision.

In the United States, investors will be watching for both the morning report on inflation and afternoon release of the minutes of the last meeting of the Federal Reserve.

Economists expect the first report to show annual inflation picked up in March to 1.8 or 1.9 per cent from February's 1.5 per cent.

As for the minutes, there has been a lot of chatter that the Federal Open Market Committee, the U.S. central bank's policy-setting panel, could cut interest rates at some point. So markets will be looking for any clues they can find.

"We expect the minutes of last month’s FOMC meeting to underline that further rate hikes are off the table, although any explicit discussion of rate cuts is still unlikely," said Andrew Hunter of Capital Economics.

THURSDAY

The budget that everyone wants to see will be released after markets close.

"The first full budget under the new Ontario government is without a doubt the most hotly anticipated of the 2019 season," said Bank of Montreal senior economist Robert Kavcic.

“That’s partly because Ontario has one of the most challenging fiscal situations in Canada at the moment, and because the current government represents a complete U-turn versus the prior government from a policy perspective – that is, promising spending restraint and tax relief,” he added.

"We’ve already seen a number of measures taken, including scrapping of the cap-and-trade program and some modest taxation tweaks, but it’s most likely that the biggest election promises on the tax front will be reserved for years three and four of the mandate."

The big question, Mr. Kavcic added, relates to when Ontario expects to balance the budget.

FRIDAY

JPMorgan Chase & Co. and Wells Fargo & Co. kick off earnings among the major U.S. banks.

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"Banks across the board are finding it difficult to maximize returns in the current low rate environment," CMC's Mr. Hewson said.

"With [JPMorgan] missing profit estimates in its last quarter for the first time in 15 quarters, and the recent announcement of job cuts in its asset and wealth management divisions, this week could well see another disappointment," he added.

As for Wells Fargo, Mr. Hewson said, its “performance is a much better guide to the U.S. economy given its sensitivity to the ebb and flow of the U.S. economy, as well as the housing market.”

Required Reading

Female executives scarce

Female executives are still scarce in Corporate Canada, Tim Kiladze reports. And the few who made it are fed up.

Airlines seek delay

Canada’s airlines are mounting a last-minute push to delay the July 1 launch of a new passenger-rights regime that promises to compensate customers for long delays and overbooked flights, Bill Curry writes.

Like an unhappy spouse in a marriage, Alberta is doing a lot of soul-searching these days about its relationship with the rest of Canada. And increasingly, it’s a case of show me the money, Barrie McKenna writes.

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